In the quest to reduce company health care expenditures, employers are leaving no cost-saving stone unturned. Organizations are considering various ways to share costs with their employees, from defined contributions to high-deductible plans with an employee health savings account.

However, these strategies only cover the “care” half of the cost-cutting equation. Equally important is the employee “health” portion. After all, one way to reduce health care costs is to help keep employees from getting sick in the first place.

Employee Health Reward Options

Aon Hewitt reveals that 70 percent of companies report that they use incentives—either rewards or consequences—to drive employee behaviors. The most effective rewards are premium reductions, contributions to health savings accounts, cash, gym membership, enrollment in disease management programs, merchandise, and gift cards. Generally, incentives are awarded to encourage one of the following:

Build awareness (e.g., take an online health assessment)

Take action (e.g., enroll in a weight management or fitness program)

Achieve outcomes (e.g., lower blood pressure or cholesterol levels)

As an example, in 2014, Washington state employees had a $125 wellness incentive through the Public Employees Benefits Board Program. Workers had to complete three tasks:

Choose a primary care provider

Complete a health assessment

Start a wellness program activity (options ranged from diabetes control or tobacco cessation to weight management or improved diet)

35 percent believed there are savings associated with using incentives

Incentives have been shown to increase rates of simple behaviors—such as completing a health assessment—that do not require sustained motivation.2 Long-term behavioral change requiring ongoing encouragement over an extended period of time can be more challenging. This may require a program where progress-based incentives are tailored for each employee.

Behavior change that is more difficult—like quitting tobacco—may require more substantial incentives. In one successful program, whose results were published in the New England Journal of Medicine, half of the 878 employees participating received the following incentives while the other half did not:

$100 to complete a smoking cessation program

$250 for cessation of smoking within six months of study enrollment

$400 for abstinence for additional six months after initial cessation

Among those offered the financial incentives, three times as many participants had quit a year later.

What some well-known companies are doing

Safeway’s voluntary Healthy Measures program evaluates four measures of health: tobacco use, weight, blood pressure, and cholesterol levels. If employees “pass” all the tests, annual premiums are reduced by up to $780 for individuals and $1,560 for families. The program helped the grocery store chain keep their health care costs stable during a period when such costs to other companies rose by 40 percent.

CVS pharmacy requires all of its employees to submit to a medical exam or pay a $600 fine, while Scotts Miracle-Gro not only bans smokers from employment, it fires employees who smoke. Johnson & Johnson recoups its original $500 wellness incentive from employee paychecks if at-risk workers, identified through their health assessment, don’t agree to follow advice on how to improve their health.